Page 301 - CityofSouthlakeFY27Budget

TABLE OF CONTENTS

Budget Performance. In any given year, the City’s revenue can perform better than expected. This is
especially true when revenue estimates are conservative. Likewise, City departments sometimes do not
spend their entire budget allocation. Adjustments are made throughout the year, but when year-end
numbers show excess revenues and unspent appropriation, this operating surplus “rolls” into the fund
balance for the subsequent fiscal year.

Assuming that the fund balance is maintained at its optimal level, this creates options for the use of the
excess reserve funds above the optimum level. Strategic Initiative Fund

One option is to put these funds to work as one-time revenue to fund needed projects that are non-
recurring expenses. In this way, the City uses the one-time funding for one-time costs, and can avoid
borrowing money for these projects. This is the
Figure 2
basic idea of the Strategic Initiative Fund.

Another option the City Council has exercised has
been the granting of a homestead exemption. The
City implemented a one-time general homestead
exemption in FY 2009 and again in FY 2013 to
complement the ongoing over-65 exemption
($75,000), disabled exemption ($75,000), and the
over-65 tax freeze. This reduced the taxes levied
against Southlake taxpayers for tax years 2008 and
2012, years that the City could afford the reduced
revenue, and the City applied the exemption to its
revenue projections for the budget year. Since 2015,
the City also took steps to incrementally raise the
homestead exemption to the 20% max allowed by
state statue.

Figure 2 tracks the city’s tax relief efforts since
2009.

In FY 2027, we are continuing the 20% homestead exemption and propose reducing the operating tax
rate by $0.005, which is below the no-new-revenue rate..

Capital Improvement Program (CIP). In 2006, the City had identified over $22 million in General Fund
capital projects that needed to be addressed, but were unfunded for the five-year planning period.
Given that the City’s annual General Fund bond program was $3 million, it was difficult to see how the
City would be able address the critical infrastructure projects in a timely manner. The SIF presented a
way for the City to infuse cash into its CIP. For FY 2006, almost $750,000 was transferred from the SIF
to the CIP, allowing the City to address more projects than initially thought possible.

Since that time, the City has been able to increase its cash funding for the CIP, lessening the debt the
City has to take on to make appropriate investments into needed street, sidewalk, drainage, facility, and
other improvements. About sixty-two percent of the SIF allocations since 2006 have been used as cash
funding for CIP projects, which ultimately means the City avoids borrowing costs for addressing those
FY 2027 City of Southlake | Budget Book 301